Misadventures in VC Funding: The $24 Million Moz Almost Raised

Over the course of this year, I’ve written a coupletimes about raising a potential round of venture financing for my company, SEOmoz. At last, the saga’s over, I’ve been released from terms of confidentiality and I can share the long, strange story of how I first rejected, was eventually persuaded, but ultimately failed to raise a second round of investment capital.

My hope is that by sharing, others can learn from our experience and possibly avoid some of the mistakes, pitfalls and pain we faced.

Raising money for a startup is an inherently risky proposition. You step up to the plate knowing that the odds are slim and that, for every story of success on TechCrunch, there’s two hundred companies pounding the street, getting nowhere. We went the opposite route – letting investors come to us (a strategy I wrote about last year). This is the story of that experience – being “pitched” by investors, the decision-making and negotiation processes and the end results.

Do We Really Want to Raise a Round?

In November of last year, 14 months after my previous failed attempt to raise capital, we started receiving inquiries from a variety of firms – venture capitalists and private/growth equity investors, asking if SEOmoz was interested in pursuing funding. My answer was always the same, and looked fairly similar to the email below:

Over the following months (Nov 2010 – April 2011) we hunkered down, focused on product, technology and marketing and grew the business, largely ignoring the possibility of outside funding.

In March of 2011, one particular investor (whom I’ll refer to through the rest of this post as “Neil”) reached out to us and was especially excited about the SEO/inbound marketing sector and SEOmoz in particular. He sent this email after our call:

It was flattering and exciting to feel this great level of interest in our business from an investor, and Neil wasn’t the only one, either. Here’s a list of the folks we talked to seriously (meaning more than just a single phone call or email) over the first 7 months of 2011:

For the firms noted above, I’ll keep specifics of who we spoke to and how far we progressed private (as I did in my post on the 2009 experience) using pseudonyms.

The week of May 8th, I met with 3 investors in New York City and one in Boston. In preparation for these meetings, I tried to remind myself that money might not be the best thing for the company with a public blog post on the topic. I was focused on the goals of building relationships, sharing our trajectory and learning as much as possible about how others viewed our business and market.

Despite this bevvy of interest, my previous fundraising experience had left me gun-shy and reticent about committing. A week after the meetings in NYC, the Moz team had a serious chat about whether raising a round could have a serious, positive impact on the company. That discussion included a lot of back-and-forth, but the reasons we ultimately decided to test the waters more seriously included:

• Grow Engineering – For the first quarter of 2010, we had a mandate to grow the engineering team so we could improve our product faster. This proved incredibly difficult, as the much-reported tech talent wars in Seattle created a vacuum of big-data savvy SDEs. However, in Q2, our position shifted as we were able to significantly grow the engineering team – to a point where we had to slow hiring in order to keep payroll in line with our bootstrapped growth. While certainly a positive, this change meant that we were limited by cash in the bank for the first time in a while.

• Scale Data – Linkscape, Blogscape and our APIs cost ~$100K/month at the beginning of the year. In Q2, this cost had risen 30%+ and we foresaw a nearby time when it would double or more. In July of this year, those costs were, indeed, nearly $200K. We’ve gone from 40 virtual machines hosted on Amazon to 200+, and while we’re thrilled to see our metrics (mozRank, Domain Authority, et al) achieve widespread adoption, many of the heavy users employ our free API, leaving our revenue from other channels to support these costs. Long-term, we believe in free, open data as a way to grow the brand, the company and our revenue-producing channels (and it’s part of our core values to be as open and generous as possible with our data), but the cash limitations had finally become a point of frustration, and another reason to seek growth capital.

• Expand Facilities/Benefits/Team Happiness – The Moz offices can comfortably hold 45-50 people, but we realized that by Q3, we’d already be at that range. We also recognized that the aforementioned talent wars were pushing us to grow the range of benefits and space we provide to the team. Moz was named #6 on Seattle’s Best Places to Work, but we’re striving for #1, and we strongly believe that the better we can treat our team, the more amazing our output and results will be.

• Release New Products – Our big data projects have been challenging, but also incredibly rewarding, and we felt a strong drive to do more, faster. We want to produce marketing analytics beyond pure SEO, moving to field like social, content marketing, local and verticals (mobile, video, blogs, etc. – anything that sends traffic on the web organically). Some of those require heavy upfront investments in data sources, engineering and market research. One of the weird things I’ve found (which probably deserves a post of its own at some point) is that the larger your scale, the longer it takes to build product. You’d think that having 15 full-time engineers and a significant support team around them would mean faster development, but it doesn’t – the scale we need to support (nearly 14K paying customers and 250K+ users of our free products) for anything we release means far greater attention to architecture, reliability and quality then when we had two devs and 500 users.

• Invest in Marketing – Today, most of SEOmoz’s acquisition of new customers is through inbound/organic channels (~80%). We recognize there’s a lot of room for growth in both organic (content marketing, more community investment, SEO, social, etc) and in paid marketing. An investment here would allow us to take a longer view on customer payback period (the time until we recoup an investment in acquisition) and experiment in new channels, too.

• Provide Liquidity to Founders – Gillian founded the company that would become SEOmoz in 1981 and I’ve been working with her since 2001. As Gillian’s stepped aside from day-to-day responsibilities (post 2008) and taken on more of an external evangelism role, we all felt that giving her a more formal exit and liquidation path would be an ideal option. I also personally felt it was wise to take some money off the table.

I’d be remiss if I didn’t also mention another meeting in Boston – with Hubspot’s Dharmesh Shah. For the past few years, Dharmesh has been an amazing mentor to me, and someone whom I always turn to when big decisions like this appear. On the topic of funding, he gave clear, well-reasoned advice (and later, made that advice public). We met in May, just after my in-person meetings in New York, and noted that the combination of a great market for investment plus strong growth at the company made for excellent fundraising conditions.

Testing the Waters for a Large Financing Round…

Thus, in mid-May, when Neil asked to follow up with an in-person visit to our offices in Seattle, I sent the following email reply:

After that meeting in Seattle, things got hot and heavy. Neil wanted to do a deal and we began talking terms. It was at this point that our executive team and board of directors decided to take some steps to insure that we were making the right moves. These included:

• Meeting with and, hopefully, receiving offers from 2-3 of the other firms who had reached out to Moz to help test the waters on valuation and deal terms, and to make sure we had a partner and investor we loved.

• Deep-diving on Neil and his firm. We ended up speaking directly to folks at 2 of their portfolio companies, several people who worked with Neil in his previous roles and back-channeling to nearly half a dozen others who’d worked with him in one way or another through our network of contacts (both at Moz, and through Ignition Partners, our investors from 2007).

• Working hard on long-term, strategic planning for 2012 and beyond – what did we want to do, how much would it take, and where would the money be spent?

• Preparing a semi-formal slide deck to pitch the partnership at Ignition, as we wanted them to participate in the round as well. We also made a light version of this deck to send around to several folks in the field and help drum up any potential interest without being too forward or pushy.

• Investigating the fundraising market for self-service SaaS companies like ours by talking to as many recently funded entrepreneurs in the space as possible. Through this research, we hoped to get a good idea of what sorts of terms and valuation we should expect, and what was “market” (VC-speak for “normal”).

In mid-June, I made a trip to San Francisco, ostensibly to participate in SimplyHired’s SEO Meetup, but also for several Bay-Area meetings with VCs. Three of these turned into more serious discussions.

June was also when we started to feel a bit cocky. We were in active negotiations with Neil. We had multiple talks going with investors in the Bay Area, and almost every week, we had a ping from a new source reaching out to see if we were ready to start a conversation. I spoke to dozens of folks by phone and email and learned a lot more about the market – and those conversations gave me a lot of reasons to get excited. As in 2007, a lot of startups were reporting a very hot market for raising money. Valuations of several SaaS businesses I talked with were in the 6-10X revenue range (and those who raised in Q1/Q2 got valued on their 2011 estimated revenues)!

Narrowing Down the Field

Throughout the process, we’d been extra careful on the investors we engaged. We turned away one firm due to a bad experience we had with them in 2009 (email below).

This example wasn’t alone – we turned away another after talking to some of their portfolio companies and a company they’d look at but didn’t invest in and hearing about some questionable behavior.

Our biggest filter wasn’t deal terms or price, but cultural fit. We’d been warned many times against adding an investor who didn’t share our core values or who displayed any dishonest/manipulative tactics in our conversations. That ruled out a few folks, but also made us more excited about Neil, “Reggie” (an investor in California) and “Todd” (at another California-based firm).

One of my favorite emails in our process came from Reggie, who sent this just before their in-person visit to the Mozplex:

Adorable, right?! Sometimes, it’s the little stuff. Neil always asked about my grandmother in New Jersey (she had a rough fall, a concussion and spent a few weeks in hospitals, but is now nearly 100% and doing well). Todd wolfed down multiple helpings of phenomenal braised pork shoulder made by our systems engineer, David. Sarah and I dragged both Neil and Reggie to meals with both of our significant others.

But, the fundraising process certainly wasn’t all fun, and it did require a tremendous amount of work, particularly from Sarah, Moz’s COO, and from Jamie + Joanna on our marketing team, who held numerous calls with investors on a ton of membership acquisition/retention-related topics. Here’s a brief snippet of a weekend email thread that Sarah sent to Todd:

In June and July, the funding process probably entailed hundreds of combined hours of work on the part of our team – much of that was me, but plenty spread to other departments and functions. We knew this was a very big decision – one that would massively impact the future of the company – and thus, we wanted to be as diligent, thoughtful and cautious as possible.

By early July, we were down to four potentially serious investors. One decided against making an offer around the middle of the month. The others were Neil (from NY), Reggie (from CA) and Todd (also CA).

Closing the Deal

At the beginning of July, one of the investors made an offer at a $50mm pre-money valuation for a $25mm investment. Here’s my email reply:

That offer was subsequently raised to $65mm pre-money, which was matched by another firm (both Neil + Reggie). I was feeling pretty good about my negotiation skills, until a couple weeks later.

Todd was an early favorite of several Mozzers. At the end of his visit to our offices, I gave him a ride back to the airport (I borrowed Geraldine‘s only-slightly-dented 2003 Kia Spectra, since I don’t actually own a car). Near the end of the conversation, Todd noted that his firm “would have a tough time getting to $100mm” on our deal. I probably should have corrected him at that point (it would have been the TAGFEE thing to do), but I instead said something like “this isn’t entirely about the highest pre-money valuation; it’s about the right fit for us.” This would serve as a good example of why I shouldn’t try to “play the game.” A week later, after lots of back-and-forth, Todd noted that his firm simply couldn’t match our valuation expectations, and although interested, would be backing out.

I’m not sure if our strategy with Todd was a big misstep or a small one, nor whether they would have made an offer in the $60-$70mm range if they’d thought that was our target. I also don’t know why he thought we were offered those much higher numbers, nor what we should have done from there. We could have gone back and pushed on what they thought we wanted, but it seemed the time had passed (hard to describe why/how exactly).

We made our decision, sent a polite note to Reggie thanking him and another to Neil saying we were ready to move.

Pitching Ignition Partners

In addition to raising funds from an outside partner, we also wanted Ignition, who had put $1mm into the company in 2007 to participate in this next round. Their support would be helpful in making outside investors feel great about the deal, and would help us have more shared ownership among our board members.

Below is the pitch deck I used for Ignition (parts of this made it into the “light” version we sent to some other folks earlier in the process):

We’ve had a terrific relationship with Ignition over the years, and I continue to recommend them to startups of all kinds. As part of the “thank-you” for their support, Geraldine baked some cookie bars the night before our pitch meeting, which I brought to their offices and handed out prior to the presentation. I took a photo hoping that I’d be able to share it on the blog once the deal was done:

Note the delicious-looking baked goods on the table

Ignition confirmed, just after this meeting, that they’d love to participate in our next round, in whatever quantity made sense to the outside, lead investor. We were excited, and spent some serious time in July planning a comprehensive strategy around how to grow with the funding. We even started some conversations with other companies we were considering acquiring.

Neil brought several folks from his firm to our annual Mozcon in Seattle. On the last afternoon, we met to negotiate some final terms of the deal. It ended up looking like this:

• $24mm invested; $19mm from Neil and $5mm from Ignition
• $65mm pre-money valuation, $89mm post
• $18mm to SEOmoz’s balance sheet; $4.75mm to Gillian, $1.25mm to Rand
• No liquidation preference for Series B (Ignition has a 1X on the Series A)
• Straight preferred (meaning that the investor either gets their money out in a sale OR the percent of the company they own, but not both)
• New board would include myself and Sarah (our COO), Michelle (from Ignition, who’s been on our board since 2007) & Neil plus a new, outside member to be approved by all parties
• The CEO could only be replaced if ALL board members unanimously approved the new person
• A sale of the company for less than a 3X return to Neil’s firm could be vetoed by them
• All other terms very similar to our Series A deal

We felt really good around these terms, and although we recognized we likely could have gotten a higher pre-money valuation through a more intensive process, we decided not to take that path, reasoning that delay could cause a dip in the markets, and that we needed to concentrate on the business, not spend more time on fundraising.

On August 5th, we executed and entered a 30-day due diligence phase.

Then Things Got a Little Weird

Michelle was the first to note that something was “odd.” In a phone call with Neil, she heard him comment that they “needed to do more digging into the market.” In her opinion, this was very peculiar, as investors typically have a thesis and great quantities of diligence long before talking to companies, nevermind prior to a signed agreement. In fact, when Neil approached us, it had been under the auspices of excitement about the SEO/inbound marketing field. One of the things we liked best about them had been their strong belief, passion and knowledge about the SEO landscape. Questions about “market size” and “opportunity” at this stage seemed peculiar.

I shot Neil an email noting that we were a bit concerned. Here’s his reply:

We didn’t actually chat that night, but a few days later. On the call, he strongly disabused me of the idea that they’d pull out, noting that they had invested massive time and energy, multiple trips to Seattle, multiple people from their firm, considerable research and expense. One of the most memorable quotes from that conversation that stands out in my mind was “We never pull out after signing an LOI unless we find fraud or some other serious misrepresentation of what we already know.”

We set up a lunch date for the next week on a Friday, just prior to their planned, in-person diligence with our team the following Monday/Tuesday (when their legal, accounting and tech folks would be meeting with teams and execs to make sure all was in order).

One other item Neil mentioned in the call was our July numbers – we’d just closed out the month and sent them details a couple days prior. Neil noted that they were curious about why July’s revenue was off budget by ~$70K. I promised to follow up and provide details.

For reference, here’s our revenue numbers from January to July of 2011:

In December, our draft budget had us doing approximately $15K more in revenue in June and $70K more in revenue (both product – our only services revenue is events like Mozcon). However, we’d beaten revenue estimates from January – May and thus, were still ahead of our total revenue target by ~$35K for the year.

Nonetheless, given that June and July were slightly slower in growth of new PRO members (we grew approx. 7% in July vs. our projected 10%), Sarah revised our rolling forecast for the year, projecting that rather than hit $12.4mm (our previous rolling forecast given our higher-than-expected growth Jan-May), we’d instead be around $11.2mm unless growth in future months picked up again. Our model for the rolling forecast is fairly standard and fluctuations like this are fairly common. At one point earlier this year, the rolling forecast had us projecting nearly $14mm, and as low as $11mm.

We didn’t worry much about these numbers – for the past 4 years running SEOmoz, we’ve often see months that beat our targets and some that don’t. Certainly, a month where we expected 10% growth but only hit 7% was nothing shocking, particularly in a year where, even with the revised estimate, we’d be doubling revenue from 2010 (in which we did $5.7mm).

The following week (Tuesday, August 16th), VentureBeat wrote a story that SEOmoz had closed a $25mm funding. I quickly commented on the story and called the reporter. They fixed the piece a few hours later:

Ugh. Bad journalism.

I also got on the phone with Neil, but he didn’t seem overly concerned about the misinformation or the story. As far as I know, no one at Moz was responsible, and the misinformation made this seem incredibly unlikely. Given the numerous inaccuracies (our employee count, customer numbers, the description of what we do and more), I really have no idea who their source was, or why they published this piece without waiting for our confirmation or statement.

We went back to work on the diligence documents and preparation, a bit shaken and more than a little skeptical.

Two days later, the day before Neil and I were to meet for lunch, he sent an email indicating they were cancelling their in-person diligence in Seattle (planned for the following Monday/Tuesday) pending our meeting. I immediately assumed they were killing the deal, and emailed the Moz team to stop the work for the process on our end.

We met in New York and had lunch. I took notes:

I thought they were going to focus primarily on the growth we missed in July – despite knowing that it wasn’t a big deal from the long-term perspective of the business, it was nerve-wracking and hard-to-shake in those few days. But instead, we talked for nearly 2.5 hours about our market strategy, how we planned to expand our product, deliver more value, etc. Neil shared a lot of what they’d learned talking to CMOs, VPs of Marketing and SEO specialists at companies they knew. It was all pretty flattering, actually – I was shocked at how positive the feedback had been.

The only big concern he brought up from that research was that higher-up marketing executives still lack belief in SEO. One quote that I noted above was a VP who said “I know it’s irrational, but nobody can prove to me that we should spend more.” This lack of investment in SEO and inbound marketing compared to paid channels, despite the higher ROI and lower acquisition cost, is something every inbound professional fights against.

At the tail end of the conversation, Neil brought up their concerns around our July numbers. They asked whether we felt the month was “a blip or a softening of the market.” I explained that when we looked into it, we saw a few major drivers:

• June/July lacked major new product releases/improvements as we geared up for MozCon at the end of the month (where we had three big releases, including the new OpenSiteExplorer, one of our flagship products)

• We had turned off re-targeting ads for SEOmoz and OSE in late June as we switched providers and didn’t have it on again until early August. Re-targeting’s great for us, because we have such high organic traffic, and it brings those visitors back. Based on the May/June numbers, we likely lost between 5-10% of new memberships from this alone.

• May, June and July also didn’t feature as many upgrades and improvements to our performance marketing channels, primarily because we focused the team’s time on other projects, including, notably, calls, metrics requests and data dives related to fund raising.

• We put more attention and effort than intended on events – Mozcon and our Mozcations – and less on our funnel. We were definitely feeling a bit cocky thanks to our better-than-expected January-May.

• The team was distracted by fundraising. I actually didn’t use this explanation when talking to Neil (I think I felt ashamed of bringing it up – that it would make us look worse than the others), but it certainly played a part.

I also told Neil that, if it was very important to them, we could certainly hit the $12.4mm revenue target for the end of the year by focusing on short-term acquisition, but that it would come at the expense of longer-term projects, and we felt that was unwise and unwarranted.

The meeting wrapped up, and Neil promised me an update by Monday. Tuesday morning we got the call; no deal. They released us from the term sheet conditions including, generously, the associated NDA. I promised that in the blog post I’d write (the one you’re reading now), we’d keep their identity anonymous, “Dragnet-style.”

Why Did The Deal Fall Apart?

We have a few working theories, but don’t know for sure.

• What Neil Told Us – according to Neil, the sole reason for their exit was the softness in the June/July numbers. However, this is very hard for me to swallow. We literally missed growth in two months where we had a combined $1.8mm in revenue by $85K, and we were still technically ahead on the revenue projections for the year (by $35K).

• The VentureBeat Theory – one guess is that someone important and trusted by Neil contacted him following the VentureBeat story and advised them not to put money into us for one reason or another. This fits the timeline reasonably well, but they did seem nervous about the deal even prior to the story coming out.

• Market Timing – as anyone who follows the stock market knows, the beginning of August was a rocky period. It appears to have stabilized more recently, but it could certainly be that, as in 2008 when funding suddenly dried up, the market’s crashes took their toll on Neil’s confidence or that of their firm’s LPs (who said something like “don’t make a capital call right now.”)

• Something in the Research – it’s also possible that something they found during their diligence into the market spooked them, but they couldn’t or wouldn’t share it with us. It’s hard to imagine what it could be, or why they wouldn’t tell us, but I suppose anything’s possible.

I doubt we’ll ever know for sure, and that’s pretty frustrating. Last week, I sent the team this email:

The replies back were awesome. I won’t share them here, but they killed whatever doubts I might have harbored from Neil’s withdrawal. Working at SEOmoz just flat out rocks, and it’s because I’m surrounded by some of the best people ever to be assembled. Re-reading those emails now still brings an unmitigated smile to my face.

What Did We Learn? What Lessons Can Others Take Away?

The lessons from this process are challenging to compile, not only because it was such an inbound process, but because so much of the reasons for the final result are unknown. Nonetheless, I’ll try:

• Don’t Let Fundraising Distract You from What Really Matters – If I had this to do over again, a big part of me would still want to have the slower-than-expected growth in July to make sure we didn’t get a fairweather friend who didn’t really believe in the company onto the board, but I also know we could have been much more disciplined. Spending the team’s time not just on phone calls and webinars to walk investors through our numbers, but time researching, pulling metrics, re-inforcing market questions, etc. was a waste. We should have let the investors do more of the work and kept the team more focused on the mission at hand. If an investor really wants to be part of Moz, a few missing, non-standard business metrics aren’t going to change that.

• Inbound Interest is No Guarantee of Getting Funded – For some reason, I had this idea stuck in my head that if the company is being pitched to take funding by investors, the deal will be dramatically easier to do. This might be true, but “easier” doesn’t mean “in the bag.” Our first round did work largely this way – Michelle and Kelly pitched us, we said yes, money arrived. This time, Neil, Reggie, Todd and plenty of other reached out to us, pitched and at the end of the process, nada.

• Be Careful About How & Where Funding is Communicated – We tried to be cautious this time around, not wanting to get our team or ourselves too excited before money was in the bank. Nevertheless, we definitely started planning ahead a bit prematurely. The nights and weekends (and a few days, too) spent brainstorming and roadmapping an SEOmoz with another $18mm in cash was time we certainly could have spent on more productive, realistic goals.

• Be Excellent to Everyone, All the Time – I can definitely confirm that the world of venture capital and private/growth equity is a very tiny one, and that entrepreneurs, partners and service providers talk incessantly and vociferously about nearly every experience with an investor or company. If you’re in the startup world on any side of that equation, it pays to be a great human being and to treat everyone with respect (this is probably another full post worth writing at some point). We heard some not-so-great things about several potential investors, and it made us pull back pretty quickly. Folks in the Valley often talk about how “reputation is everything,” and this experience re-inforced that for me.

• Never, Ever Get Cocky – I have to admit that sometime around the end of June/beginning of July, I was starting to feel pretty good. A bunch of investors wanted to put a LOT of money into our company. We were beating revenue month after month. We turned away investors instead of the other way around. I tried to stay humble, stay hungry and not get overly excited about things, but the idea of having liquidity for my family, the ability to grow Moz in a new and exciting way and, yeah, the idea of finally having some personal savings were all dancing in my head.

• Remember What Really Matters – No matter how this VC story went, I’m an incredibly lucky member of the human race. The big stuff is going amazingly well. My grandmother, who had a fall back in May, has almost entirely recovered. I’m surrounded by people I love to work with, all of whom are excited to come into the office every day, investment or no. And I’m married to her:

Our Plans Going Forward

The best part about this otherwise frustrating result is that we didn’t end up signing a deal with a firm who didn’t truly believe in us, our market or our future. Despite our positive experiences with Neil from March – July, the last couple weeks clearly showed that he would have been a poor choice for our board of directors. Whatever caused the cold feet, it’s better now than after the investment, when a wrong choice could have made life unpleasant for everyone for many years to come.

On the investment front – we’ve decided that attempting to raise a round of funding anytime in the next 6 months would be a mistake. We continue to receive calls from potential investors, but my message has shifted to “let’s maybe talk again next year.”

Personally, I feel burned. This is the second time in 3 years that I’ve gotten excited about raising a potential round of capital, and it turned out terribly both times. I’m not sure what I did wrong or what I should do differently next time. I also don’t know how we could have done more diligence on Neil or his firm – literally everyone we talked to raved about him; even the skeptical third-parties who went digging into their mutual contacts for us had great things to say.

Phone calls and meetings are one thing, but this wasted a massive chunk of our time, energy and emotion. Putting faith in the process in the future would be hard – if a deal can fall through this late, when we weren’t even pitching but got pitched… Well, I just don’t know. Everything about this feels wrong.

What I can say is that this experience makes me and the rest of the Moz team even more inspired and motivated to build an amazing company. We can’t help but feel passion for proving doubters and naysayers wrong. The greatest revenge is to execute like hell, bootstrap all the way, and do what we said we’d do – become Seattle’s next billion-dollar startup, and make the world of marketing a better place.

Thanks for sharing what is clearly a very personal experience, so that others may benefit.

For what it’s worth, I can only see you and Team Moz moving forward stronger, having worked through this experience.

http://diesellaws.com Diesel Laws

Wow. What an amazing post. Thank you for taking that time to share it with us – I can seriously say I have learned a few things for the future about the process of VC Funding and how I will think about the overall deals going forward.

“Remember What Really Matters â€“ No matter how this VC story went, Iâ€™m an incredibly lucky member of the human race. ” AMEN.

Thanks so much for sharing,

– Diesel Laws (@diesellaws)

http://GeekAtSea.com Kirill Zubovsky

Sorry to hear about this unfortunate story, but like you said, you will make it to the top regardless, might just take a little longer. In fact, look at this as a positive outcome, you did not have to give up part of the company that you will grow to a billion-dollar company and will keep more of! Thank you for writing this post too, hopefully it could come handy in the future; after all, sounds like you’re now an expert on a fair number of VCs!

Raj Suri

Ugh. Dude that sucks. I think every founder-ceo out there who’s got the scars feels your pain on this one. Thanks for the amazingly honest and detailed post!

http://www.webbroi.com Casey Armstrong

As always, such a great post. The transparency and lessons on a topic such as this are much appreciated and greatly valuable (that’s probably an understatement). Looking forward to what’s next from SEOmoz and enjoying the ride.

Cheers,

Casey

Vineet

This is awesome, we may be going to raise our round sometime next month and I can only imagine how the process is going to be. Wish me best of luck

http://trunk.ly Tim Bull

This really sucks!

Totally feel your pain and although our deal was nowhere near that size, I can emphasise having the rug pulled at the last minute too.

It’s hard to appreciate from the outside just how much of a distraction not just the process of pitching funds, but closing the deal actually is. It’s hard.

You’re dead right though, if two months “less than expected” figures scared them (against an annual ahead of target and overall growth), you’re best off to move forwards without them.

Cheers,

Tim

http://www.legal-marketing.co.uk Evolved Legal

Wow !

I don’t think I’ve ever read a post like this before. Your openness and willingness to share some inside details on your business is amazing. Few businesses would ever do such a thing, but you are smart – you know that your business is very highly respected and that part of that respect comes from your totally transparent approach.

Big compliments !

http://www.localseoguide.com Andrew Shotland

Rand once again you’ve proven that you need to play the game your way with people who truly understand the game you are playing.

I believe the last time around you decided it was too complicated to raise $ from your SEOMoz members, and in fact it may be. But they are the ones who get what you are doing and want you to succeed by being true to yourself. Actually, they are the ones who know you will succeed by being true to yourself.

And if you can’t raise $ from members as investors because it’s just too much of a pain in the ass then turn SEOMoz into a non-profit and throw a fundraiser. I gladly give to my favorite public radio station every year and while your musical taste isn’t nearly as good, your service is.

Or else, keep writing excellent VC-bait posts like this one and wait for one to send a signed term sheet and a check before you’ll even have a conversation.

http://www.socialseedmedia.com.au Heroly Chour

G’Day Rand,

As always, thanks for sharing your experience and valuable insights.

It’s comforting to hear from other’s who have failed to raise funding.

I’m sure with your focus, passion and ability to inspire others, you and the rest of the Moz team will create Seattle’s next one-billion-dollar company!

Cheers and all the best!

http://www.forex.co.ke Amoroso Gombe

Great post. Thank you. In Kenya we always think American entrepenuers have an easy time, surrounded by tens of thousands of funds all aching to invest but it is clear that no matter where you are capital raising is a fraught process.

http://www.trainsem.com/ Ash Nallawalla

Rand,
What a rare insight into the VC world – thanks for sharing it. Some of the numbers about the operation of the Moz machines were also enlightening. The experience has made you a lot stronger and clearer in your mind about capital raising. All the best.

Mark mitchell

Amazing insight . I have no doubt you guys will fulfill your enormous potential. Having the right VC funding is important not only to get the right numbers on the table but culturally there needs to be some form of match and long term partners intent matched at the start

Great post

http://Www.distilled.net Will Critchlow

I wish I could somehow have seen something that would have let me advise you better through all this. I guess we are all doing it for the first time. Here’s to the $1bn

http://www.tfd.co steve boymel

Rand, great post. I have been there once or twice. Keep moving forward — good things will happen – Steve

http://martinmacdonald.net Martin Macdonald

Mate, I feel for you on this one – as you know I’ve been involved (albeit from slightly further away) with VC rounds in the past and I know what the uncertainty and stress can feel like.

Having said that, I’m pretty confident that you guys are in a strong position – market brand leaders, fantastic recognition within your chosen vertical, and the ability to go out there and push into other non-core markets as you see fit.

I hope that a few years down the line, not getting this round will be a blessing of non-dilution for you and your family.

One final point, YES: family matters more!

http://www.creativewrx.com Brad Scobie

Inspiring story Rand. I absolutely love the Moz transparency – never lose it!

http://www.caliberi.com Jonny Scott

Inspiring numbers and a kind of lame point of view from the other side there re buy-in on SEO. Nevertheless invaluable experience for you and well shared. Well played.

http://www.feld.com Brad Feld

Rand – spectacular post. Thanks for sharing this in so much depth. As a VC, it makes me crazy to hear these stories, especially when a VC says â€œWe never pull out after signing an LOI unless we find fraud or some other serious misrepresentation of what we already know.â€

I put this up on Ask the VC today in When Financings Fall Apart. By sharing the story, you help lots of entrepreneurs be forewarned. Thanks for doing that.

http://sco.tt Scott Yates

Brad, so glad you saw this post. I was going to send it to you if you hadn’t.

And you are exactly right about how this post will help lots of entrepreneurs. Thanks, Rand, for sharing it!

Bottom line, as always: focus first, last and always on making customers happy. The rest will flow from that.

http://twitter.com/lakey Chris Lake

Great post Rand – lots of takeaways for those on the fundraising circuit. Am sure you’ll go from strength to strength with or without the VCs.

Daniel Sim

Extremely candid and fresh, thanks

http://www.mixtrail.com Ed Mullen

Thanks for be so generous in sharing your experience. It’s not easy being candid about something that turned sour so soon after the fact.

(My guess is it had to do with the general hissy fit the markets were having in early August.)

You are absolutely right to look to your wife and family to recalibrate what’s most important. And your possitivity and willingness to share put a lot of that good mojo out into the world. It’ll all come back to you.

http://volnado.com Travis Laurendine

Great lesson learned thanks for posting. Do you think maybe “Neil” thought that you guys leaked the VentureBeat story and that was what caused the breakdown?

http://yoavshapira.com Yoav Shapira

Thank you for sharing all the details in this insightful, honest, transparent post. It’s much appreciated and I’m sure it will be a good lesson to many.

http://www.twizzyweb.com Mauro Mazzocchini

Hey Rand,

thanks for sharing your experience in this amazing post!
It’ll be very useful for lots of people and, despite the results, these misadventures are a huge opportunity of growth.

Keep up the great work at SEOmoz!

Cheers,
Mauro

http://www.imod.co.za Chris M

Rand, thank you so much for sharing your story, so many things I can relate to and so many things I have learnt from. Pity about the outcome, but as a fan for many years, this is probably a good thing and you’ll rise above it quickly and easily.

Onwards and upwards to you and the Mozzers!

http://www.mattcollins.net Matt Collins

Thanks for sharing some of the nitty-gritty of your experience in this way. All the details you’ve shared make it terrifically powerful. Best of luck with things going forward.

Miguel Jaureguizar

Just hopping in to say that this is the best, most engaging post I’ve read in 2011 – thank you for sharing this personal experience. As a COO I felt most empathic with Sarah.

I would think that massive change in macroeconomics since the end of july may have had something to do – monthly figures being an excuse as not to show weakness. It tells more about the VC than about seomoz.

You live a wonderful life and job; here in other countries (Spain) fund raising is quite more limited and complicated. Enjoy the ride, it still seems to be a great experience.

meow mix

Great post. I have no experience in entrepreneurship and I don’t have a startup, but you wrote in a very engaging manner and I was quite interested in the story. Should I ever go down this path on my own someday, I will remember your experience and advice. Thank you.

http://www.bigpictureweb.com/ Josh Braaten

Thanks for this great story, Rand. It surprises me that even at the highest levels of our industry, we’re still fighting to show the value of inbound marketing fueled by SEO. Sorry your funding didn’t go through.

If it makes you feel better, I believe in you and SEOmoz. Your mission backed with a respect for all of the tenants of a social business… whether you raise it or earn it by yourself, SEOmoz certainly has a $25M+ future in my eyes.

http://www.seoaudit.hu Imre

What can I say, we can’t see on every day this is kind of a blog post. I share the opinion of all SEOmoz fans, who really believe in the future of your services and further success of your business years to come. Keep your positive attitude towards your goals and strategies.
Hopefully and for sure, organic online marketing spendings will grow year by year but good tools like yours is not enough, a brain switch is needed for top level executives, especially marketing managers still spending more on old-school strategies and for sure they find these new online strategies as a threat for themselves, their career.
Lastly, all I can say, keep on developing your services, the company and things will go the right way, the golden fish is in your hands, don’t let it swim away to open waters

Jeff Coe

I know I am biased but as I started as an entrepreneur and have gone from dark to light side the past 10 years, I firmly believe that you ABSOLUTELY should employ a corporate fundraiser for any amounts past a series A or bigger than 5 million. Its really hard for the CEO to be objective about the things an investor will look at, and it is really hard to spend so much of your time on it, as you mentioned I have wasted at least 6 months at one of my startups and a friend of mine recently had a nervous break down due to the stress of trying to build a business and raise funds on the side… simply too much pressure and he was very alone.

http://www.SiteWit.com Ricardo Lasa

Rand,
Thanks for the post. It is really helpful to see other founder’s experience in VC funding.
Thanks again.

http://www.research2zero.com Kris Tuttle

Thanks for taking the time to put this post together. We work with early stage companies that have a hard time understanding the ins and outs of venture finance and this real life story matches ones we see and experience all the time (although often at smaller scale.)

Stories like this are the same reason we’ve never taken any external funding at Research 2.0. It might mean it will take us longer to get to where we plan to be but dealing with an external investment raising process and the subsequent “help” from those investors if we were successful would be too disruptive.

http://www.charliekemper.com Charlie Kemper

Thanks for sharing this story… Fundraising is definitely a difficult process and this post is a must-read for every startup team.

Kenny Martin

Thanks for the wonderful post Rand!

It was a long, yet wonderful read, that provided a lot of insight and answered a number of questions I was having.

http://www.ifyoubuild.com Greg Rublev

Rand, what an inspiring story. You certainly set a very high bar for professionalism and leadership, and that is really the lesson here. Moz is lucky to have you as CEO. Best, Greg

http://www.engagesimply.com Judy Shapiro

Hi –
Personally, I wanted thank you for taking the time in documenting this on a few levels.

First, it is a story of the real world of fund raising that belies that myth -“New venture x got $5MM in two weeks”. Getting funding is really really hard most of the time.

Second – this account provides valuable lessons all around especially useful for those of us getting ready to be chewed up by the VC engine (polite though they are).

Third – creating a real business is not a one time funding event but a commitment that spans years. Great business weather the silly VC storms (upsetting though it is.)

Last – when I was at Bell Labs New Ventures we assessed which technology was worthy of venture status. When we turned down a technology (led by a passionate inventor) we made a point to remind them ITS NOTHING PERSONAL.

It’s an important lesson to remember so these disappointment event can be put in perspective. I have no idea what happened here – but I will bet dollars to donuts – it probably had a lot less to do with you than you realize. “Neil’s” pathetic excuse of soft summer numbers is a definite clue it had not much to do with your business prospects but some other event. It’s so hard NOT to take it personally which is why I take the pains to make this point

Want a guaranteed, no fail formula for success? Keep going so failure simply does not occur.

But it seems you know that secret full well.

Good luck and keep truckin’.

Judy Shapiro

http://about.me/seyitaylor Seyi Taylor

Wow. This is an amazing post. Definitely going into my Evernote. Thanks for sharing and keep up the good work.

Ricardo Lousada

Great post! Tks for sharing the story…Keep going and focus on the pursuit of becoming Seattleâ€™s next billion-dollar startup Companyâ€¦the secret is not to avoid falling but in getting up over and over again.

@ricardo_lousada

Thomas Cornelius

Great post and thank you for sharing something that did not go as planned, brave and important for others!!

It is good to be reminded not to get the dating process confused with money in the bank.

http://FangDigital.com Jeff Ferguson

Thanks for sharing, Rand.

http://www.bigoven.com Steve Murch

Amazing post. Really insightful, honest and worthwhile read. And yes, big picture, your life is fantastic. Congratulations on all the success so far, and best wishes for the future.

Eric Willis

Thanks for posting this…one of the most imformative posts I have read in a while…very open and personal.

Tyler Davidson

Terrific post Rand!

Your insights are bound to help others navigate the often opaque waters of raising money. The candor and detail of your post is eye opening and a must read for anyone with dreams of raising money or expecting an “easy exit”… This game is not for the faint of heart!

That said, based on the metrics in your email, I’m fairly confident you’ll continue to be successful on your own merit with “Neil”. Press on.

http://angelpitchguy.com Marco Messina

Congratulatons. What a tremendous service to your fellow entrepreneurs !
I can relate to your pain and disappointment (for the wasted time and emotion) having had many similar experiences over 35 years. Regretfully I never courageously and kindly took the time you did to share the experience in this detail for everyone else’s benefit. Thanks.
In my own search for “what went wrong” in my cases, I eventually developed a high level of skepticism about investors, angels (I am one) and VCs, understanding of a market when they open conversations with entrepreneur. Unless they have invested in an almost identical business before, I give no presumption of truly and completely understanding or having researched a market segment prior to beginning negotiations. Almost always that effort, to the full extent it is necessary, is postponed until final DD following a term sheet because it saves effort.
While in each case there may be other causes for aborted deals, the most prevalent is for investors to get excited and pursue deals based on presumptions that in due course may not be validated to their satisfaction.
I’d love your feedback if this resonates in any way.
Great post.
Marco

http://www.searchlightinteractive.com Sean Elkin

Rand,

Very interesting you shared all of this and in such detail. Thank you for that.

Sorry you guys had to go through all those hoops. I suspect the lead in your investor group got a splinter in his/her arse, or had bad indigestion or the like and that killed the deal ; ).

Point is, don’t waste another second thinking about why. SEOMoz is steamrolling in 2011. Onward and upward for you…and hopefully the rest of us.

Cheers.

http://www.mercuryminds.com Dongan

thank you so much for sharing your experience.

http://www.30go30.com Dr. Pete

I remember the creators of the show MST3K once talking about how they learned to stop caring if everyone got their jokes. The only cared that the RIGHT people got their jokes. When the money comes, it’ll be from the right people for SEOmoz, and that’s what counts.

I could rant about how I feel about the VC world, but it’s Monday, and no one needs that. I’d just like to say that my long-term money is on SEOmoz, along with my blood, sweat, and tears.

http://www.onlyonceblog.com Matt Blumberg

Awesome post. Great lessons in it. My favorite takeaway is this one: Be Excellent to Everyone, All the Time. You never know what happens in life.

http://www.mangiamarketing.com Anthony Mangia

Thanks for sharing this experience, Rand. It was an awesome read. The strength of the community you’ve created and your dedication to your core values are your best strengths, and those aren’t going anywhere. I know number-wise you are the industry’s biggest SEO software firm, but that aside, there’s just this palpable feeling I have that you guys will be the market leader for a long time to come. Best of luck down the road.

http://webfadds.com/blog Scott Frangos

Rand –

What goes around comes around. In your case, this post makes obvious that you are sending out honesty and integrity… and you continue to be willing to learn. I greatly appreciated your post, and have been following your company for some time since I heard you speak in Portland, where Joanna Lord, and up and comer also spoke… and who did not yet work for you (a smart “acquisition”). Kudos all around.

One piece of advice — get a good PR professional on board to manage media relations. You suspected that the deal may have gone south due to the article that appeared, and a good PR person would be able to better control this factor.

You’re one of the bravest, most open people I’m connected to. We met in 07 via Ignition (I was working for a VC-backed company and they had just picked up SEOmoz). The company I worked for had made a series of choices which let to its closure. I tried to learn everything about the world of VC because of that experience, and I completely respect your transparency here. As I continue to follow SEOmoz, the VC aspect has been the one that worries me most, and I must admit I’m relieved for you and your team that you are refocusing your efforts on the business basics at hand. Thanks so much for sharing your story – I hope others considering the same will take all this learning into account before making any leaps of faith.

http://simplee.com Beth Morgan

I’ll echo everyone else here and say thanks for this great, open, honest post. I’m a recent SEOMoz convert– in fact, signed up during your flat June– and I have been delighted with the tools. Everything is so well designed, easy to use, and intuitive, and you clearly understand that you are communicating to marketers, not techies. The Moz team will prevail!

http://www.hypedsound.com Jonathan Jaeger

Not trying to suck up, but this was the most interesting article about funding I’ve ever read. Sobering if you take it in light of all the past hurdles you needed to pass to make SEOMoz succeed.

Rand, you have great perspective on what’s really important in life. Best of luck to you an your team- I am sure you’ll continue to succeed. Thanks for sharing.

Mark Risher

Fantastic post, Rand, and frightening how familiar it feels. We have ridden the same flattery/depression curve as inbound investment leads fail to pan out, or consume limitless time, or rat-hole on all the wrong things. Thank you for reminding us all that we’re not alone.

Best of luck to you and Moz.

http://www.ipatient.com Dan Munro

Epic post – and story. Painful to read – and live through – but also what allows us to sleep at night – and then build world class businesses. I know of a similar one that struggled to get their Series A – then shelved the effort entirely. After 11 consecutive quarter of significant growth – landed the largest Series A in the country (for that year). $130M Series A. The support you do have (Ingition + other names you referenced and on the comments here) far outweighs any $’s lost on a single transaction. Class acts are always priceless! All the best on your way to $1B+ !!

Luciano

Blessing in disguise?

http://www.seomoz.org Gillian

Perhaps. Certainly there are few companies in the world today where one can be pretty sure of the very large double-digit increases in value that we’re anticipating here at SEOmoz for the coming year. On the other hand, as Rand noted, there were good uses for the funds if the deal had come to fruition and a lot of time went into both raising capital. It never feels good to spend a lot of time and energy on things that don’t pan out.

http://www.haptify.com craig vachon

Well written. Appreciate the detail and candor. Be well

http://www.jobwand.com Patrick Poon

Rand, thank you for sharing your experience with us. Sometimes, we need to take a step back in order to make a giant leap forward. I’m sure you and SEOmoz will launch and continue your journey to greatness.

Will Hartmann

Rand,

Sorry to hear how this all turned out and the stress it caused you and the team.

However, know that your transparency and honesty have created far more support, on both a personal and company level, than any outside funding could probably ever provide. I’m an even bigger fan than I was before!

Now, get back to work growing to $1B.

http://www.zillow.com Spencer Rascoff

Great post Rand. Rooting for you,
Spencer

http://www.latogalabs.com latoga

Rand,

Thanks for taking the time and being as transparent as possible in this blog post. This is a great example of what can makes the startup community great, the sharing of experiences (both good and bad) and the view behind the curtain.

With the positive attitude that you’ve displayed in sharing this and the positive attitude from the great team you’ve built around you, SEOmoz should be considered a huge success regardless of the current round of investment money.

Ely

Take whatever revenue projection the funding would have helped achieve, lock down with the team, answer the question “How will we achieve these same goals without the funding?”

http://www.atlasomega.com Calvin Tang

Wow, what a thorough and telling story.

I wouldn’t fret too much about this failed raise. You’ll likely look back on this episode and realize that the company just dodged a bullet.

You’re profitable and growing at a great pace. Stay the course and don’t get distracted by the VC money. Having such an option is a luxury among startups.

I wish you guys continued success!

Steve

Really enjoyed the post, Rand. Having seen the inside of that dance several times, from the other side of the table, if it got to that point, then it likely has nothing to do with SEOmoz as a company. Your other theories – LPs resisting a capital call, the VB story being due-diligence-gone-awry, etc – are all good ones. To them I might add these baseless speculations:

* Neil was your strongest advocate among his partnership, but there were negative voices at the table. Eventually, those voices lobbied hard enough that they persuaded some people to reverse their votes.
* Neil’s portfolio has had some mishaps of late, and LPs resisted the move not because they can’t make a capital call, but because his fund is in trouble with LPs and they told him to focus on his current investments and getting value out of those.
* Somebody whined about having to go to Seattle for board meetings – maybe Neil, maybe an observer. Proximity bias at its finest.
* At a fearful point in the public markets, fear overwhelmed greed in the form of someone going to new rationalizations: “it’s too correlated to our other investments X and Y!”, “Marketing budget is the first thing corporations cut in lean times!”, “Giving founders liquidity too soon will ruin their motivation levels!”, etc. Those objections turned into the “it’s not you, it’s me” non-answer breakup speech you got.
* Misgivings over revising their valuation up

The only lesson I might add to your list is that this underscores the value of having a multi-party syndicate (not just with Ignition, but with other suitors). If Reggie had been persuaded to join in the deal with Neil, then they both would have had a motivation to save face by not backing down. (same goes for Todd’s expectations being managed, but you already beat yourself up over that one and I can hardly fault you for it anyway).

Some surprisingly-high percentage of deals that reach a term-sheet stage never close. Wilson Sonsini or Gunderson would have more solid numbers on that, but 50% wouldn’t surprise me. You’re not alone in this, and at the end of the day you still have a profitable, wonderful business. May you have continued success, and may others be so lucky as to have this problem

-Steve

http://www.canuckseo.com Jim Rudnick

@Rand…great story here…..and my thoughts on all of this add up to one point to remember…

you’re better off “without” Neil et al — that “with” them, lad!

will post the URL to this to others too…great great read!

Jim

http://www.seomoz.org Joanna Lord

I am so glad to see this post pulsing through the social web today. I think your story Rand and the extended one of Moz is truly inspirational for the entrepreneur in all of us. This is the fourth startup I’ve been fortunate enough (and at times crazy enough) to pour my heart into, and my entrepreneurial standard is continuously raised due to my experiences here. Thank you for having the courage to stand by your transparency vow, as it truly helps the greater community of startup addicts.

On a personal note, I do want to also add, that I have never been more excited about our future at Moz. The team is moving and grooving, and given our plans for the next 6 months, it will surely be an epic ride. While signing money may have made things a bit easier here and there, I never did like easy. What I do like is passion, and we have that in abundance.

http://www.odddogmedia.com Adam Broetje

The best part of this post is you simply telling it “how it is”. There’s pressure as a CEO to know everything and the simple fact is that we don’t and can’t know it all. Seeing someone who I look up to in our industry have basic questions in emails to VC’s is refreshing. Sometimes it’s best to own what you do or don’t know and just ask the simple question. Love it!

Neil Kusens

Fantastic and brave post! If nothing more, you’ve inspired me (and I’m sure countless others) to be more publicly forthcoming in the trials and tribulations of being an entrepreneur in the startup world.

Thanks again, and congrats on the bootstrap success!

David C

Fab post and thanks for sharing your experience in such candid detail. Its not something you see very often and anybody here who is raising or thinking about raising money have some wonderful insights into the process, and further hammers home the fact that the deals not done until the money is in the bank.

http://www.mogensnielsen.com Mogens Nielsen

Rand, thank you for writing what must have been a very difficult personal post!
I donâ€™t have the best experience with investors in my former startup, which is why I am dreading my forthcoming seed round. The cultural fit is so important that it should be on the very top of the list when matching funding with the startup.

William

Hi Rand,

Great post! Thanks for sharing your experience. I’ve been though the VC funding process many times first in s Start-up then as a VC, then as many more times as an intermediary, and even as an Angel Investor asked by the company to help raise the first VC round.

I think that it’s great that you have taken the positives out of the experience, but at the same time, I know it must have taken a lot of time and effort of you and your team to go through the whole process for the second time. From a number of observations of your current and previous blog on raising VC funding, I would suggest that for a round of this size, you really should have carefully selected a Financial Adviser / Broker / Intermediary or Temporary CFO to handle your this process. You are not the right person to balance all the details of pitching, following up and and handling a bunch of VC’s on top of your regular tasks.

2% success fees, retainer +1%, or salary + bonus would have been well spent for someone experienced to handle the process. In fact, the likely higher valuation or amt raised or timing would have been worth it alone on top of the time freed up for you and your team to focus on your core business. The experienced finance person would have kept working diligently with Reggie and Todd for a longer time and would likely have figured out that Neil was not the right investor earlier.

Considering your SEO industry sector, your open personality, and your company being based in Seattle, I would have advised you to stick to West Coast VC’s only. Dealing with East Coast investors (like the HK investors I deal with as I’m based in Asia), is much more transaction and documentation oriented, so getting and LOI from Neil should have just motivated you to get 2 more LOI’s and seeing which would turn into a binding agreement first. (you can agree not to shop their terms, but you have to keep looking which keeps Neil honest).

Anyways, keep building your company and don’t be soured on VC’s. Most are really good people, and are most of their firms.

Cheers,

William

http://daleallyn.com Dale Allyn

Rand,

Thank you for your detailed, transparent and humble post. I’m sure that many startup teams will benefit from what you’ve shared here.

http://www.experts-exchange.com Jonathan Hoekman

Great story, Rand. Thanks for letting us come along for the ride!

Knowing the history of VC and the company I work for, I am hoping that this might be a blessing in disguise for you and your team.

Bottom line, you have a company that is providing an amazing service in a market that is continuing to evolve and expand and become MORE crucial, not less.

“The greatest revenge is to execute like hell, bootstrap all the way, and do what we said weâ€™d do â€“ become Seattleâ€™s next billion-dollar startup, and make the world of marketing a better place.”

You’ve already made the world of marketing a better place. This blog post is emblematic, and shows how SEOMoz is infused with your white-hat ethos (quality through transparency, sincerity, long-term pragmatism.)

http://fashiondad.com Eric Burgess

Hey Rand, sorry to hear about the VC debacle. As you pointed out though, you were dumped in college only to meet your awesome wife! The same will likely happen with another VC firm. At that point you’ll go “Ahhh, that’s why that happened!”

PS- Neil sounds like a tool.

http://www.reitlerlaw.com/attorney_bdavey.htm Bdavey

Great post/insight. Great deal terms (other than the veto right for less than 3x sale). Would think about taking down Company numbers, why let the whole world know your business.

Best regards.

http://www.sanfranciscoconsult.com Caroline- San Francisco Consult

Uh uh, that’s Finance talk mister! Rand Fishkin is NOT from this world, he’s from the SEO world.
Transparency, communicating to the extreme, especially in writing ( vs omnipresent and simplistic VIDEO), is what he likes to do. Yeah? Yeah!

I was also suprised at how open your post is on your numbers but can truly appreciate your approach and I dont think it will do you a disservice at all.

I think Rand the real reason the VC guy backed out is because VCs CANNOT understand SEO. SEO a low key marketing approach, that responds to client demands rather than imposing ads on them with the idea that the BIGGER, the LOUDER the ad, the BETTER…

Sorry VCS, for 15 years, SEo specialists have been discreetly bringing in clients to businesses everywhere, without the heavy-handed approach.

That, I think, it too much for them to fathom. As others have said, its probably a blessing in disguise, as VCs would have changed your approach undoubtedly and made SEO Moz a poorer SEO service provider.

http://splendidwillow.com Peter Claassen

Thanks very much for sharing Rand. I once worked for a gentleman with a very similar sounding voice to yours. The same thoughtful, self aware, and transpart voice and style you seem to have. He’s since done great things and I know you and your company will too. You already have.

Cheers,
Peter

Mark Free

Rand…all things for a reason. I think you are spot on with not having the overhead of a non-believer on your board. Money is only one ingredient to success. The right Investors need to bring more than money to the party.

http://popstache.com Andy Keil

Thanks for such an informative post Rand. The insight is invaluable. Sorry you had to deal with that.

Tom V.

Inspiring. More companies should strive to become what yours already is.

Mike

I know nothing about your situation or the VC world but I would definitely think the stock market implosion had everything to do with their decision and nothing to do with you or your business. The IPO window has closed. The latest bubble might have burst just like that and they might not have an exit for their own companies led alone yours any time soon. We are most likely heading for a double dip recession so why would they want to invest new capital in such uncertain times? I’m assuming 2008 was a traumatic experience for these guys. Also, they are probably guessing that if doomsday does strike all over again your multiple will be cut down significantly so no biggie for them to miss out on one deal. They can come back on their knees and try to win you back when the dust clears.

I had a business once that had 30 employees and mebbe 1/5 your revenue. Seems to me that you are in a great position and most likely taking home some good coin already. Don’t let greed get the best of you. You have built something special that you might be able to pass on to your children one day. Keep it for yourself and enjoy it. You have already accomplished what 99% of entrepreneurs will never ever accomplish.

http://www.groupappz.com Steve L.

Rand,

Thanks for taking the time to write and share this with us, and doing it in a classy way the protects all involved.

Having raised well over $150m in Venture Financing from over 20 different firms, I will tell you that VCs evolve like spouses. They either turn out really really good, or they turn out really really bad. Sorry but there is no such thing as one that’s in the middle. So in fund raising, like in finding that one you really really want to stay in love with, it’s sometimes the best thing in the world that you get left standing at the alter, or better yet, rejected before you spend the money on the diamond ring! You’ll be fine. Private like public capital markets are always ready to back innovation, growth, profitability, and smarts. But then your wife probably tells you that everyday! Good luck.

RahulH

Rand

Thank you for sharing the story of your journey into the VC funding world. While the end result sucks your candor, openness is truly valuable.

Hopefully your execution speeds up the path to success and prove that you can do it on your own.

Alan Bleiweiss

Rand,

My take is you didn’t do anything wrong, and there’s nothing you could have/ should have done different. You and the team poured out as much effort and energy as humanly possible while still running the ship and maintaining an amazing offering, community and conferences.

From where I sit, it’s clearly a matter of reality that the life lessons were needed wherever they occurred, yet just if not more important, the fact you didn’t do a deal shows as you recognize now, “Neil” would not have been a positive contributor to the Board.

Moz is one of the few resources in this industry I personally believe will continue to thrive in blessed ways for many years to come if for no other reason beyond great product, it’s the heart and soul you and the team show up with every day. Better without his influence than with.

http://jasonhobbsllc.com Jason Hobbs

“The greatest revenge is to execute like hell, bootstrap all the way, and do what we said weâ€™d do â€“ become Seattleâ€™s next billion-dollar startup, and make the world of marketing a better place.

I know we can do it.”

Amen. Thank you for taking the time to share this journey and the valuable lessons learned. Awesome.

http://www.jobzey.com Mark Hall

What a phenomenal post! Thanks for being so transparent, open and real. You have humanized a process that all of us in the startup world tend to view with so much glamour. Thanks and I wish for only the best for you and the entire SEOmoz family!

http://blog.vminnovations.com Kush A.

Unbelievable trasnparency, thank you for sharing your experience & lessons learned with the rest of the world. Cheers to you & the Moz team.

http://answerguy.com Jeff Yablon

Rand, I hope everyone appreciates the candor with which you wrote that. You are clearly a man of high principles.

But I think you were played. Yes, everything you ascertained is correct, but remember that anyone who takes diligence as far as your ersatz investors did and backs out has either lost their own funding, found something seriously amiss at your company, or wasn’t being forthright. I vote for choice C.

Let me know if I can help you in any way; I have some experience with this kind of stuff.

http://www.barokas.com Ralph Fascitelli

Rand ..great stuff..should be an HBS case study for fund raising..ultimately you will get want you need cause your biz model is viable and core management team solid

http://Www.Buuteeq.com Forest Key

Great post, thanks. Keep reminding yourself that the Catharsis value for having written is (almost) as good as money in the bank! Stay hungry, growth is still key to your business and cash is a great accelerant–you learn more about this process with each cycle, this too shall be of use to you when you do the mega-liquidity deal!

BT

The email you sent, specifically #6 about making sure equity is preserved is absolutely awesome. Way to take care of the little guy. The act alone of speaking up for that is something of a motivation you can’t put a finger on. Watch those 0.2% make all the difference.

For what it’s worth, I was 3 months into an acquisition offer which crossed my path and an outside individual had a distaste for me. A group of 4 was brought down by a minority partners’ friend. Silly. Quite the ride though, going from an offer of $14 million led by a billionaire to zero all in ~4 weeks.

BT

Correction: ~12 weeks

I learned similar lessons. I shifted from my game plan to then focusing on how to please this investment group. Perhaps the biggest of all, it brought me back to the drawing board. I am less involved in the company as a result, by choice. Through intuition I created the brand, but resonated with it less after going through that ordeal.

http://www.whitespark.ca Darren Shaw

Loved this post Rand. SEOmoz is an amazing company destined for great things in the years ahead. The world will eventually wake up to the immense value of inbound marketing, and I’m pretty sure it will be SEOmoz tools that proves it to them.

Based on the notes you took at the meeting, it looked to me like there was a pretty serious lack of confidence in the growth potential of the SEO market and there were some concerns about weaknesses in the product. I suppose I wasn’t at the meeting, and don’t know the context of those notes, but I was surprised these didn’t make it into your ‘Why Did the Deal Fall Apart’ section, regardless of what ‘Neil’ said about the June/July numbers.

http://www.efellemedia.com Fred Lebhart

Incredibly open and informative post, Rand -we’ve had offers and have been tempted to take investors on one of our products and have been wrestling with the decision for months. Like seoMoz, we started as a boot-strapped company and have posted 100%+ growth year after year (for 6 years running).

We run a service business that also has a unique set of software-as-a-service tools and have created a market-disrupter with very little competition. The desire to grow rapidly is there but the potential headaches from dealing with investors and their distractions so far outweigh it…for anyone in a similar situation, I’ve enjoyed the following:

Thanks for sharing and being real. The comments you made about your team resonate with me; one of the things I love most about the company I’ve built is the team I’ve put in place!

Fred

http://hirerock.com Rob Cullen

Fantastic post! Really enjoyed the read and learnt alot from your personal expereince, good luck with SEOmoz in the future, with some great products!

http://rdpnda.com JM Loingtier

That’s a great post and a formidable effort in being fair and transparent.

But let me answer your implicit question: THIS IS NOT YOUR FAULT.

There is absolutely no difference between purchasing say a jacket, a home or a share in a company. As such VCs have exactly the same behaviors than ordinary, everyday shoppers.

If you’re a shopper, you’re enthusiastic about brands (VCs are about “hot trends”) and you fail for advertising and peer pressure (“we gotta have one too”).

It’s good to keep 3 things in mind:

1) Time is your enemy and that of your company (so negotiate hard at first and be flexible at the end)

2) Like any shopper VCs are not acting like rational beings

3) Be a car dealer (or a jacket dealer, or a real estate agent). Same tricks (you don’t need to lie if you know what you are doing) will lead to the same effects.

And of course have something reasonably attractive to sale …

In other words, a deal could fall through for reason as mundane as Tood’s half-drunk buddy joking about SEO (what’s next for you man, a spam company?) …

And of course Todd is going to have to justify his decision to the remaining of the flock so at the next cocktail, he’ll give his buddies a “reasonable” reason for bailing out; what was a very good deal 2 weeks ago becomes a lame duck in just two 5-mn conversations.

http://changespeakingout.blogspot.com/ Carl

Rand,

I am seeking funding also, but not from VC Firms, but I can tell you that the concept of “culture” is critical. I am old economy and the investors I have to deal with all want in but they have their own interests, and I know from experience that the clash of interests can destroy the opportunities that I am trying to create.

If the synergy is not right and if the interests do not align then walk away; and sadly, I am getting tired of walking away but I realize that I have no choice.

I think you have a great product and I hope to be a customer of yours shortly, but first I have to find investors who are not just buying themselves another customer.

Good luck to you!

http://www.vocus.com Bill

Good post Rand. You guys are going some really good things and confident that if you keep focused on 1) culture and 2) growth, funding will take care of itself.

http://www.thrivehive.com Max Faingezicht

Rand,
Great post! Thanks for sharing in such detail, there are many valuable lessons here for all of us.
Fund raising is definitely a tricky game played in the fine line between trust and treason.

http://seogadget.co.uk richardbaxterseo

I feel some frustration on your behalf, Rand I really do. I think it takes increbible character to respond to this in the way you have – IMO great character is why you own a great company, lead a great team and have great, great product.

SEOmoz is the only business I’d invest in right now. I’d make that choice on the people behind the brand, the progress the product has made and finally, the belief I have that you guys have solid, 10X potential over the next few years.

Soon, buddy. Soon.

Alex Barris

You say you didn’t want someone who was manipulative, and then you say this:

>Adorable, right?! Sometimes, itâ€™s the little stuff. Neil >always asked about my grandmother in New Jersey >(she had a rough fall, a concussion and spent a few >weeks in hospitals, but is now nearly 100% and doing >well). Todd wolfed down multiple helpings of >phenomenal braised pork shoulder made by our >systems engineer, David. Sarah and I dragged both >Neil and Reggie to meals with both of our significant >others.

Classic manipulative tactics.

http://tonyadam.com/thoughts Tony Adam

Rand,

This is a great post and I’m sorry to hear about how things fell through, but, like you said happy that you didn’t end up with someone on your board that isn’t a cultural fit.

As someone that has gone through the fundraising process recently, it really is great to come across posts like this that remind you, you’re not alone. But, I especially loved the “inbound interest is no guarantee of getting funding” section because I know first hand what that is like.

Good luck with the next steps of SEOMoz, in the short and long term…you guys are going to do amazingly whether you raise another round or not!

http://www.iacquire.com Joe Griffin

Rand – thanks for sharing. I’ll tell you what – hit your future forecasted numbers, or even close, and in 1-2 years you’ll be happy you didn’t raise money. If you can do it without a big round (perhaps you get a small one from Ignition for dev expenses) and keep costs down, maximizing EBITDA you’ll probably sell to HubSpot, Salesforce, or one of the large marketing vertical software companies in a straight acquisition. You’ll make more money my friend, and you’ll have the prestige of running the same show at a larger company. Use the fire. Good work as always.

http://stephenpurpura.com Stephen Purpura

I realize this was and is difficult to think about and discuss. Good luck to you!

I live in Bellevue now and I read your posts occasionally because I have a tangent interest (my PhD is focused on understanding user search behavior and its subjectiveness). As a researcher, it seems like search links are declining in relative importance while competition increases. While I don’t know your business or pitch well, one of things that I would want to understand about your business — that I don’t know immediately from you posts — is how your customer base is thinking about transitioning through this change in market conditions. Take my reaction for what it’s worth. You put in a good writing effort and I gave you a serious reply (from limited information) in return.

Jeff Anop

Great post. Amazing honesty and detail. That was the most interesting post I have read in a while. Rand: we spoke years ago when I was at AutoTrader.com and SEOMoz was just getting started. You all have come a long way and your honesty and core values will only work out for you in the long-run.

Thomas Evankovich

Rand: Your post is a total benefit to all those in the capital markets. I hope some business school professors see the great value in your composition and use it as a case study. Best wishes on other deals.
Tom

http://www.merchantos.com Justin Laing

Thank you for sharing! This rare glimpse into what it’s really like to go after a financing deal.
You’ve got a great company that you have built. It’s crazy they didn’t want to invest in you when you look around and see what people are putting money into. You’ve got a real business with real revenue, and I’m sure are going to get huge or sell for a large amount.

PMRP

Great response to an obviously frustrating endeavor.
Yes the diligence for a deal can be very distracting – especially for a small /young company.
Thanks for the Post – good luck getting the $1B.

http://www.gigmasters.com Mike Caldwell

GREAT Post. Amazingly transparent and authentic. Thank you!

bryant jaquez

thank you so much for sharing. This is the most honest and transparent article, I’ve ever read on the whole VC process. I wish you guys the best.

http://www.PerfCover.com Rob Peters

This was some of the best information out there, it is truly inspiring. With your permission, I would like to Share your link with my Entrepreneur Group – Tech Ranch Austin.
I my self am starting out with a great product that I found I needed and found that others did too!

Seeking Angel investors or even VC investors for the “Unskilled” Inventor is a daunting task and sometimes brings out those who would take advantage of us. It is really hard to find this kind of insight when you are starting out.
Thanks!
Rob @ PerfCover.com

http://www.goesanywhere.com rick

Well, I hope that makes you feel better. :/ I’ve been through similar fundraising efforts over my 35 years in business, NEVER to have a VC deal pan out squat.

I’d even received an invitation to be on “Shark Tank” which, exemplified by the fine print in their contracts giving them additional various perks and bennies at guess-who’s expense, I believe does show the true nature of the VC.

I do want to thank you for the post…..I wish we could compile all of our experiences and spit out the ”
right” answer for us all. Of course there isn’t one, however, I think it’s probably safe to say that VCs will usually end up in the “wrong” pile.

http://www.bayalarmmedical.com Alan Wu

Hey Rand,

Wonderful and very educational article. Many thanks for writing this to share your experiences. Unfortunately I’
m not a VC or else I’d be pouring money into company like SEOmoz.

It’s not everyday you run into a company that focuses on providing genuine, high quality content and help for the community rather that just concentrating all efforts on selling a product. This is the company you’ve built and I’m glad we have people like you to learn from.

Also it’s good to hear your grandma is doing well. Make sure you set her up with a medical alert system!

Good luck Rand!

http://markandrewphotographer.com Mark Higgins

Thanks for the transparency and really telling your story in a authentic way.

Bob Fleck

This clear, annotated story is as well written — if not better– than most pieces I see in the mainstream press.

Your even handed, fair disclosures set the gravitas of accuracy behind the events you chronicle.

Thanks.

http://www.AboutUs.org Aliza Earnshaw

A great story, well told. Tragedy, comedy, just enough detail and actual educational value. Thanks for taking the time to inform, enlighten and entertain.

DMB

Great story- fascinating reading. It’s easy to speculate, but 2 months missed projections was almost certainly not the reason, so you’re even more fortunate to avoid having someone less than candid on your board.

http://www.sortflix.com Katherine Mehraban

Dear Rand,
I cannot tell you how much your post moved me. I am in awe that you would share this with us out here. When folks network and state that entrepreneurs/start-ups really care about each other and the success or each other, I didn’t believe it at first. But, you are living proof of this. I think you and your team will do amazing things…on your own, or if the deal is right. You must have done something right to lead these innovative Mozzers….keep on doing what you do, and you will certainly leave us all a beautiful legacy.
Best,
Katherine Mehraban
Co-Founder, CAO & Chief Evangelist
PlanetBILLBOARD, Inc.http://www.sortflix.com

http://www.insightng.com Neil Movold

I couldn’t stop reading every word of your post!! It is both an eye opener and inspiring. You are absolutely right about focusing on what really matters.

I am the founder of a new startup which is right in the thick of things trying to raise capital for a born global, weightless economy play. I have a son with 14 medical conditions and a wife recovering from cancer. That all sounds counter productive, but the two are connected. They are what matters in my life and the reason I wake up every day with the strong and relentless passion to make it all happen. Many times this year I have been, what I now see, distracted by unnecessary potential investor demands – most have which have regrettably impacted some great memories I missed out on with my family. Lessons learned in life…

I wish you and your wife, who appears to have supported you and stood by your side through all of this, all the greatest and continued success for the future!

http://retailgeek.com Jason “Retailgeek” Goldberg

Rand,

It’s hard to imagine I could hold you and your firm in higher regard based on my experiences with your products and with all the excellent content you make available to the community.

But your willingness to share your experiences in the fund raising process, is extremely generous of you. Having been through a few of those experiences myself, I know how much I would have appreciated the insights from others that have been through it.

Thanks very much for sharing… you guys are rockstars!

http://steveg.com SteveG

Thanks for sharing this process with everyone Rand. I’m researching working with VCs right now and your post shines a great light on the process from the entrepreneur end of the deal. Lots more to consider again. Thanks -

http://Chillisland Chillisland

After sitting in a sinking Ship, getting now slowly back on track. My lesson from that, money is not all… no more board meetings with people on it and just screaming profit profit profit…
Take your employees be creative and have fun, life is more then just money.
keep going

http://entoura.ge Jason Brady

Rand,

I have read some great posts but this one will live on for a long time and potentially go into the hall of fame.

You’re an awesome person and entrepreneur and you have a great team who respect you… as do I.

Best,
Jason

http://www.readyflowers.com.au flowers

Hi Rand,

Really great story! It was all that much more interesting because you were so candid with the numbers.

I have never really delved into the VC world myself but it is definitely something that we may consider in the future and your insights certainly will help!

Thanks …

http://www.worldstores.co.uk Joe Murray

Amazing post Rand. Someone should set up an anonymous site where experiences of the VC community and the various players are aggregated so the next startup to be messed around has a very clear view of what they might expect. The issue of anonymity may be tricky, but posts like yours demonstrate this can be overcome. If properly moderated it will keep the VCs honest.

Inspiring blog and thank you for the openness, it helps a great deal to understand the context and shows the work that goes into these deals.

As others have speculated I suspect that there were issues that “Neil” had with his other colleagues. It sounds as though he was under pressure from them.

Having seen some great deals (and some not so great), the ones that worked best were when all the Investing team understood and were behind the deal. It’s tricky to make sure all of Neil’s team is involved though I know, both from Neil feeling he should be the front man for his team and the potential increase of even more of your time.

You’ve got a great ethos going in your company. Isn’t is wonderful to work in such a positive place!

http://realventures.com Mark MacLeod (@startupcfo)

Hey Rand,

Read this again. 1st off massive kudos on being so unbelievably transparent.

2nd, based on this post alone, I think it was a good thing the round did not happen. Taking $ 25M of capital would have removed all flexibility re: exit outcomes. And unless it was to pay for acquisitions (certainly a case for that given the # of players in your space), your core business likely does not need that or could finance that (and acquisitions) through a cheaper mix of less equity and some debt (I know you have intimate experience with debt).

Anyhow, my only parting thought is that if you’re considering raising VC anytime in the next 12 – 18 months, you might be well served to do it soon. I worry about the long term macro outlook for VC. Things are bit frothy.

http://www.netcars.com/ Louis Rix

Hi Rand,

WOW – what an experience. We secured some funding for our business in the UK and i can relate to what you’ve been through.

Our business at the time was a complete internet start-up and way too early for the VC route. We knew our proposition would be perfect for a high net worth individual. We haven’t however, ruled out VC funding in the future even though it’s still very early days for us.

You have shared some incredibly valuable tips in the post above for entrepreneurs looking for funding for their business so i thank you for that and wish you and all the Moz team all the best for the future. Iâ€™ve no doubt you guys will secure the necessary funding in the future (thatâ€™s if you need it

It was also great to see in the presentation that SEO Gadget would be a potential acquisition. We work with Rich â€œthe rocketâ€ Baxter and his team very closely and i must say theyâ€™ve done some superb work for us.

I shall continue to monitor SeoMozâ€™s progress.

http://www.socialmotus.com David Lin

Thanks for sharing this amazing and honest story about your fund raising expeirence. I am suprised all the inside information you have provided about your company to the public. Reading your post is a touch heart story for my own experience 2 years ago when an acquisition deal falled off during the 2008 GFC.

Good luck Rand and your team at SEOMoz.

http://Www.TRUUdesigns.com Louise Wannier

Rand, you are an inspiration! Thank you for your heartfelt, open and clear guidance to all of us. From where I sit, it feels to me that you were fortunate to be able to miss this one and that there will continue to be a very impressive growth and future for your company.

Two thoughts from a long term mentor of mine come to mind:
A profitable company has an infinite life!
You will win the game that is worth playing.

My best for all in life,

Louise

Jessica Eballar

Wholey cow! What an article – that was intense! I was hanging on every sentence. I commend you and SEOMoz for the bravery and efforts to test out this direction. I commend you even more for being true to the fundamental beliefs that SEOMoz was built upon in the first place. Good for you.

http://www.sigma-systems.com Tim Spencer

Rand,

What an inspiring and wisely transparent post. Unique for sure.

From my own experience, maintaing the independence that self-funding can provide in these early periods of growth provides you with many more options.

The outcome sounds like a great result.

http://www.weshare.com.au Kane Sherwell

What a geat post

I too have shared your experiences, I recruited the ceo of a major bank, only to have him steal my idea and now he is my competiion. Sad to say he is losing, LOL.

A lesson I have learned a lot from

Michael Robinson

Rand,
I really enjoyed your story. It reminded me of when I raised 12M for a semiconductor start up. I pitched to 98 vc’s when the 1st VC decided to invest. During due diligence things started to get weird. They changed partners on us and the chemistry was bad. We were desperate. Our original investors were tired. I was brought in to turn things around knowing it would be uphill. We needed the funding or we would have to fold. But once the money came in, the new investor started to attack our people and tear the place apart. I was gone in 4 months. Then they went through 3 more CEOs in18 months. VC’s are definitely a different breed. I relate to all the time u and your team wasted in answering their questions and concerns.

Keep up the great work. You sound like a very good CEO.

http://www.sahilparikh.com Sahil Parikh

Super post! Thanks for being so candid with your experiences. Tremendous help for other entrepreneurs and startups.

http://harmon.ie Yaacov Cohen

Rand, this is an amazingly transparent and candid post. I enjoyed every word. Thanks for sharing. As a Co-founder and CEO, this is very valuable experience sharing. We will also take a look at your product for our SEO.

http://bit.ly/l7PQXK Firas Raouf

Great post and great insights.

Coming at it from the VC side, I can tell you that the balance between pre- and post-LOI is a very tricky one. One of the key issues is how much time/energy that both sides can/should spend pre-LOI in nailing down whether the investment is a good fit. Pre-LOI, it is very difficult to really dig in enough to make a complete investment decision. Not only is the company not typically willing to open up the whole kimono, the VC partner/associate would also be reluctant to spend too much time diving deep without knowing that there’s a high probability of a term sheet being signed.

So the pre-LOI dance becomes a tricky one. As a VC, one has to keep showing very strong interest and passion for the company. But that interest is not based on complete insights and understanding of the market/company.

Once the LOI is signed, the investment team really gets hot and heavy. And it is at that point, that the barrage of questions/concerns come from the VC’s investment committee… and the necessary insights about the company/market begin to take shape.

What we try to do at OpenView is to make it clear to the company that a term sheet signing is no guarantee that the deal is going to close. We urge the company to keep the news about funding limited only to the senior managers. We work with them to make sure that deal related distractions are limited to the CEO and the CFO.

We also make it a point to have the majority of the business due diligence conducted in the first 2-3 weeks post-LOI signing. After this intense business review, we take our findings to the investment committee to get a thumbs up/down. With a thumbs up at that point, the probability of the deal closing becomes very high. Still not 100%, but it would take a shattering finding to prevent the deal from closing.

Still not a perfect process.

Ultimately, being forthright with the CEO and keeping him constantly updated are the most important elements of maintaining trust.

Chris Walker

Excellent piece Rand! Thanks for sharing this with us.

As a former member of an SEO company that was acquired in 2010, I can certainly empathize with the emotional unrest the process creates.

While I know that being acquired is much different than raising funds, your perspective on maintaining culture is so true.

When considering funding and the autonomy you may or may not give up, it’s important to know that when there is a new team managing or scrutinizing the finances, decisions made by these financial heavy-hitters are often black and white in nature and don’t carry tolerance or perspective on your company’s loyalty to your employees (and your employees’ enduring loyalty and hard work).

Nothing is more corrosive to company culture than watching your friends being laid off because your earnings grew by 4% instead of 6%.

Again, this is not to say your funding would create this type of dynamic but is only offered to remind you that no-one will ever care for SEOMoz as much as you and your team. Garnering an investment may lead to these types of unforeseen managerial requirements.

Anyhoo, great article. As always very thought provoking, honest and appreciated.

Best of luck!

-C

http://www.thewhitehatseo.com Mike Coughlin

“Organicus Ninjitsu” hahaha…

love it.

http://www.aseopro.com Jeff Sliger

You have a great team Rand. Having the big injection might have appeared to be the right way to go and there is always that idea that you could have done things better and faster with it.
In the long run, you have to consider how much time the extra obligation would have sucked from your ability to focus on actually moving your business forward in the direction of your own choosing.
Your transparency is inspiring.
Thanks

http://tribily.com Walter Heck

Thanks for a great article. I was just getting into the idea of possibly looking for outside funding for my startup, and this balances things a bit more. I like how you don’t want to do business with people/parties that don’t feel right!

http://www.mypolokwane.com NicP

Engaging reading! Sorry it did not work out for you but I’ll comment again when you do the $1bn funding!

http://mostoptimal.com James Burrow

It is disheartening to hear that there is still a distrust or at least a misunderstanding of SEO at executive levels. If anyone has been able to quantify SEO, it is SEOmoz!

Thanks for the great post and best of luck to you and your team.

http://www.gardengames.co.uk John Crawford

Thanks for the insight. We are looking at funding and I have sounded out several people, who all felt it was not worth the trouble and debt funding was easier. I especially like the analysis you did on value with and without funding that showed how hard yoiu would need to work for the investors rather than you.
And, thanks for being so open.

http://www.trafficado.com Andrew

Thanks for sharing! Love the detail and thought process for each step of the way. Fundraising can indeed be a long and frustrating process, especially with this kind of outcome. Keep rockin’ it at moz — we love your products!

http://optimizevancouver.com Ainsley

Rand, that was an emotional read! I can only imagine what it must have felt like.

Personally having had some experience in the startup world, I’ve found a quick way to vet-out potential time wasters:

Convertible Debentures!

What that is in short is a loan at an arbitrary interest rate (which is BS really), that can be converted to shares within the company not at the net PRESENT value, but at the future PROJECTED value, or paid out as a loan at the investors choosing.

The point is this: the Investor either has to believe in you and your abilities to invest or not invest. If you bring this up early enough in the negotiations (whether you ACTUALLY intend to follow through on that investment strategy or not) will very quickly separate the tire-kickers from those that believe in you.

Meh! Take it from whenst it came. Use it, don’t use it

Either way, you have my unending Mozzer-Support! (PS. That may very well be another good way to raise money – Mozzers – I don’t have $25mm but I would certainly be interested in throwing in a few $k – you don’t have to sell us on the value of SEOmoz and its future)

http://picsual.com Greg Tapper

Rand-
First, congratulations on your very successful company. Double digit millions is an exceptional achievement by any measure. You and your team should be very proud.

Second, thanks for your very *open* sharing of the process– down to email threads, decks, and even notebook snapshots. That takes Cajones! I probably speak for many fellow entrepreneurs by saying, “great contribution to the tribe!”

http://www.davidson.pl Renata Davidson

Fantastic post – thank you for sharing it. I was directed here by Guy Kawasaki post on G+. I’m so glad, I clicked that link I admire your story, your integrity throughut the process, the elegance with which you delt with all the parties and your courage. Lot’s of information on VC process. After reading your story, I’m going to check your services now

http://www.localtrifecta.com Samuel

Rand –

You’ve stuck to your core values and that’s what matters.

To everything there is a season. Everything happens for a reason. There is a reason why you continue to grow the way you have been. It will be better for you, your team, and the legions of people who rely on SEOMoz.

Keep up the great work, and make tomorrow better than today.

-sam

http://www.accountcaffeine.com Brian Shepherd

I echo the compliments of previous posts.
From the investor perspective I would like to add that the investor is rarely a single person or a group with a single mind. So, as much as I may have been enthusiastic about an investment, I then needed to â€œsellâ€ that enthusiasm to others on the investor team who bring a range of personal and professional business experiences to the decision. Itâ€™s a process that morphs as miscellaneous internal and external (news, economic and investor sentiment, the NASDAQ, for examople) impact opinions and judgments. I felt apologetic to the investment target when we could not get all investor participants onside for a solid company.
Thanks for your candid blog.

http://farhanrehman.co Farhan Rehman

Hey Rand, I just want to echo the sentiments from others in thanking you for sharing your story, so personally, and so intimately. Working with startups, pre-funding it’s so easy to forget just how much work, and effort goes into raising potential funding, and also in losing sight of the benefit of growing slowly, and gradually, and bootstrapping the process.
I’m always a firm believer in bootstrapping, just because of how many horror stories I’ve heard of funding rounds going awry, or investors not getting on side a few years down the line, when they want to get their money back. Ultimately, I think entrepreneurs probably make the best investors, as long as with their money they can bring their skills and experience as mentors to the business. But I guess that a few months figures spooked them, clearly means they didn’t really believe in the long term vision, and were just looking for an excuse to get out. That could be as much, because another firm wanted to get in on the deal, or because a potential competitor wanted to hold you back?
Either way, it always works out for the best! Good luck, and keep on doing the great work you do.
Ultimately, you should always trust your gut instinct.. If you get a chance, have a read of Raising the Bar, by the founder of Cliff Bars (http://amzn.to/r0FFbk), in it he walks away from the big funding deal, to go on and bootstrap and self-fund his company.
All the best!
Farhan

http://www.GenericDomainMarket.com Sameh

Wow .. the longest post I’ve read in a while but defiantly worth every sec. There is something to everyone in this post. I like the energy and the positive closing you ended your post with which we should always remind ourselves of it. To be honest, I only know less than a handful of people who share that much.

I really wish all the best to you, your wife and your business.

http://wikipediawriters.com Writer

Everything else aside, Neil is surely going to regret his decision in the years to come. SEOMOZ is on it path to being the Apple (Steve Jobs) of SEO.

http://www.fxbikes.com Mike Hodgkinson

Write a book please Rand!

Invaluable and unique insights…

Also a bit like group therapy…

Nice to know I’m not the only one

Mike

http://gplus.to/iantuck Ian Tuck

Thanks so much for this, Rand. As much as we all like read about massive success stories, sometimes the lessons that are to be learned are more from the things that don’t happen. Massive success will come to you, and when you get there, I won’t be surprised at all if you look back on this event as the best thing that never happened to you.

I’ll definitely be sharing it with my networks.

http://mbaprepschool.com Chris Aitken

Rand — truly amazing post in terms of transparency, usefulness, and insight. Cannot say thank you enough for the sharing and paying-it-forward. Like a number of others, am going to look at your company’s services because said simply, I like the way you operate. People do business with people they like. All the best for the future.
Cheers, Chris

http://www.hubspot.com brian halligan

I was one of the ones pushing you in this direction and it seems it turned into a big waste of time for you. Ugghhh. I’m really sorry it didn’t work out better for you.

Your posts are very interesting and inspiring. You are the most transparent ceo I’ve ever come across.

http://randfishkin.com randfish

Thanks Brian – I think given all the information, this was a pretty unlikely outcome, so I’d like to think that our effort and your recommendation were still a smart move at the time. Feel good knowing we’re still going to build something remarkable, investment or no.

http://www.ipstrada.net Qusai Rasheed

Rand, thanks for sharing such valuable information. I myself have been in this same situation ( our fund requirements were a lot smaller ofcourse) but the thing that I feel common was as you perfectly described it “preserving culture” and “fair weather friends” these two terms are the soul to get funding or investment and both have to be found.
Nice peice of article.

Thanks again

http://www.ramtechsolutions.net RON GRIFFIN

Incredible-keep making it happen…see you at the top.

http://www.aplus.net.nz Gabriel Bradly

Amazing post Rand. I’ve just subscribed to your RSS feed. As an SEO company here in New Zealand, it’s inspiring to hear what you’ve already achieved. Not to mention what’s just around the corner.

Reading this post gave me a glimpse of what is possible for us as a company in the next few years. Love the insights from a CEO perspective as well. Very instructive.

Keep up the great work – look forward to many great posts like this!

Gabriel

Steven Forth

Thank you. An enlightening and honest story. Glad to see you driving organic growth. Search is becoming a universal solvent, and is (or will be) at the heart of much of what we do over the next decade.

http://www.fuze.com Chuck Van Court

Hey Rand:

You sound like a guy who is very grounded and happy. Congrats! Life is short.

Thanks much for taking the time to share the details and your candid reactions along the way. I am sure your time spent here will help many others.

I too run a small technology company that we have bootstrapped to profitability and success against our much larger competitors.

Quick question: why raise so much capital? Like FuzeDigital, I bet you can make money last a long time by getting every dime’s worth, so why not raise a small round (<5M) where you have sufficient funds to jumpstart things, take some cash off the table and still retain total control of SEOMoz?

Keep having fun and best of luck to you and your team!

Chuck, FuzeDigital Founder

http://randfishkin.com randfish

Mostly it’s because $5mm doesn’t let us do very much or really accelerate where the business can reach in the next 2-4 years, and the difference in effort expended or board control ceded (every investor is going to take a board seat and want voting rights) is actually pretty small. Even from an ownership perspective, it’s maybe 4-6% equity of difference between raising $8mm vs. $24mm for each of the founders.

http://seehub.me/ VukaÅ¡in

Just a big thanks for the post.

Absolute best to you guys, rock on!

http://www.workbooks.com John Cheney

Rand,

A great post! Having lived the highs and lows of fundraising I have great empathy with your story.

Recently we raised $8m of funding for Angel Investors rather than VCs. We found it much easier to get individuals investors to buy into story and you get to talk directly with people who have cash.

Although I recognise raising $25 from Angel’s would be a real ask!

Why not wait 2 months and ask ‘Neil’ and his investment committee to give you a debrief once the emotion has passed. If they know you aren’t in the market for VC funding in the short term, they might follow your lead and give you transparent feedback of their process.

John Cheney – Founder
Workbooks.com

http://randfishkin.com randfish

Not a terrible idea… Thanks John – and congrats on the round!

http://www.dxtopdoc.com Alec Permison

I’m transfixed by the transparency of this post but also wondering about the risk of putting everything out there like this. Might a competitor see that you’re weakened by the distraction? Might a customer feel doubts upon hearing you wanted big funding and lost it?

I’m just throwing these questions out there. I don’t have a clue myself. It is without doubt a great service to all of us to get all of the gory details. I’m just wondering if you fear any negative repercussions.

P.S. Having made — and lost — big deals (but not this big) I feel your pain. It’s **so** easy to count those damn chickens…

http://randfishkin.com randfish

Fair points – it’s my belief that our core value of transparency trumps any potential loss in confidence or external opinion, and that customers, investors and competitors all benefit more (and yes, we do want our competitors to benefit as well – part of our mission is to build the ecosystem, not just win alone) from transparency.

http://richard-garand.com Richard

A very remarkable and interesting post – I put off reading it for a while because of the length but I was missing out!

You know the advantages of controlled growth, and you know you can avoid VC investments until you find the perfect partner. That’s a great position to be in. There are few things better than knowing you have not one but many great ways to grow your business. The challenge is sticking to what you know when everyone else is pursuing one path. Investments might be at bigger valuations this year but a good deal on the wrong choice isn’t that good. Sticking to your values can hold you back for a few years but I’ve seen others reach long-term benefits that are hard to match.

And if you figure out a way to avoid being affected by a big deal until it’s really closed, a post on that would be great

http://www.b-exchange.com Zlatko

Hi Rand,

I know Your pain :-), had the same situation this summer also with the VC who has actually found us and initiated a process, and at the end…nada :-). But what I disagreed with You is a statement that one should “Never, Ever Get Cocky”. I also fell in the trap, and can say that I was enjoying in all the things I was imagining. All the things You mentioned and above. Why not. One “no” doesn’t change anything if we have still lots of time and opportunities ahead. As one said ” dreamers never sleep”. Wish You all the best and thank You for posting this valuable content

http://www.kay2dan.blogspot.com Salman Khan

Really enjoyed the post Rand.

It must be very disappointing but like you mentioned, based on the tremendous success you guys have achieved, you have nothing to feel bad about.

Next year talk to Neil with a $150 million valuation

All the very best,

http://www.consultorseo.cl Uri

Hi, Rand:

I really, REALLY appreciate the time you took to write this (very) detailed post. I could almost felt the excitement and, then, the frustration.

Very inspiring and I believe I took some pointers I’m going to use when I raise capital.

This is an excellently written and very transparent view of the fund raising process. IMHO, your deal got scuttled b/c the valuation was too high for your size and recent few years of growth. But most importantly, your churn rate is WAY too high for that type of valuation. Granted, with investments in all of the things you mentioned…the assumption is that can be significantly improved. My suggestion is to focus on that and then go back for a funding round…or skip it entirely. At 83% gross margins and with a very tight budget, you can sustain at your own pace and skip the funding types. I once ran a company with a 4% monthly churn and hundreds of thousands of customers…you end up with more of a call center than a technology firm. It’s not fun frankly. Enjoy your continued success.

http://www.becomeafranchiseowner.biz Joel Libava

Thanks a lot for baring it all here. It’s appreciated.

It (their decision) may have boiled down to a bit of paranoia having to do with the possibility of, “that darn tech bubble bursting again.”

Especially since the stock market had been tanking for a bit during the last round of your negotiations.

Keep on keepin on, Rand. Your company does some amazing things, and has the revenue to prove it.

The Franchise KingÂ®

http://www.arielmarketinggroup.com Amy Tobin

I’m sure a lot of the 191 comments thus far started with:

WOW. but WOW.

I read every single word. It is rare that this sort of naked honesty comes across the web.

I learned a lot. Thank you.

http://docsheldon.com Doc Sheldon

Rand-

By now, I imagine you’re well past the second-guessing that inevitably follows such a roller-coaster ride. You’ve undoubtedly re-focused on what’s important to you and your team, and are doing so with a renewed passion.

So in that regard, it was a worthwhile exercise. Passion (though your team already had a healthy dose) is precious and not easily gained, so anything that creates more is a blessing (even if in disguise).

Having played on the due-diligence team before (both sides), I have to say that it’s a safe bet that some outside catalyst caused your investor to balk. If you and MOZ were a new, unknown entity, your transparency might have given them pause, but your TAGFEE is notorious (in a good way), so I’d certainly discount that as an issue.

I think you’ve accomplished a number of things that may offer more benefit than any cash infusion could:

1. You’ve learned a great deal more about the process of courting VC investors, that may serve you well in the future;
2. You’ve earned more respect, both in the VC community (as you said, a remarkably tiny world);
3. You’ve arrived one step closer to becoming an authority onVC funding endeavors from the entrepreneurial side of the table;
4. You’ve won more respect and admiration from your own team;
5. You’ve realized a heightened “esprit d’ corps” within your own walls;
6. You’ve almost certainly made some of your readers wiser, should they ever go through such an exercise;
7. Finally, you have probably realized that MOZ doesn’t really “need” outside investment to achieve its goals. It might have accelerated the process, but at what cost? You’ll still get where you’re going.

I applaud your commitment to staying committed to your core beliefs. Such beliefs look great on paper and sound lofty when addressing a crowd… but LIVING them, when it’s personally inconvenient is the true test of how “core” they really are.

In the long run, I think you’re better off, certainly so if “Neil” might have proven to be a mismatch for your board. Whether that’s the case or not, you may never know… ‘though one commenter’s notion of approaching him in a few months for the “real” story has real merit, IMO. You may find that outside financial concerns caused his cold feet.

I think your musings on making the VC carry most of the burden of the due diligence is one vary valuable take-away. A VC is nothing, if not a businessman, and as such, will take advantage of any opportunity to control his own costs. Due diligence costs often exceed 1% of the total investment, so they will try to push as much as possible of that cost onto others.

The other takeaway must be that it is NOT personal! Even if the entrepreneur and VC can’t stand each other on a personal level, at the end of the day, it is a purely business decision. Likewise, if they get along famously, it STILL needs to make perfect business sense.

Thanks for sharing such an intimate view of yourself and MOZ, Rand. A good read!

http://www.milefy.com Alex

Very good and informative reading. Thank you very much for sharing the story and so many details!

Alex

Nick

Sorry to hear about that experience. I enjoyed the post and I love SEOMoz products.

I gotta say, though, two straight months of revenue misses that ended up being ~$1mm (10%) off the full year bottom line can only mean a couple of things – a) the management can’t accurately produce forecasts and therefore other forward-looking numbers need to be taken with a grain of salt; or b) a softening market (temporary or otherwise) for the product which was addressed in the post.

Point A becomes even more dire if the numbers were part of a rolling forecast that was produced only a month or two before the actual results came in.

It’s all about managing expectations and showing that the team can execute against plan. If you can’t execute in the near-term, how can an investor who doesn’t know your business trust that you will execute over the many years required to produce venture-scale returns?

http://randfishkin.com randfish

The rolling forecasts predicted the fluctuations fairly well. It was the original year’s budget from December 2010 that had the 10% month-over-month growth, and technically, when the investors pulled out after July, we were still ahead of revenue forecast for the year. To be honest, I’ve never seen a startup business that flawlessly predicts revenue 12 months out.

Nick

Rand, thanks for the response.

Yeah, I definitely hear you. It’s not easy to predict revenues, particularly when there’s limited historical data as in most startups.

The point I was trying to make was mostly about managing expectations and putting the story around the plan misses. It’s never a good thing to have bad news come out when you’re trying to convince someone to take risk in your business. And while I think that two misses don’t necessarily constitute a trend, it does have the effect of spurring second-guesses in forward-looking statements.

Nick

http://www.tone.co.uk Liam Tone

Really inspiring stuff Rand. Even though it didn’t work out this time (I am sure it will in the future) it’s great that you would share your experiences.

Definitely a great read, unique insight and food for thought for all!

See you at SearchLove LDN.

Thanks

Liam

farrukh

Well done rand. I appreciate your way of telling the whole saga that unfolded. But what i get from this post is that the investors were only delaying and using false tactics to convince you otherwise that you people should value your company at a lesser level. This is the message which i think you people did not or could not get. Secondly with the economy down, SEO has been hard nut to crack for finance people (like me) who want to just quantify things which only few sensible people in finance understand. What I would however recommend to you in the future is to please package your deal, note your KPIs, and make sure you know what to pitch and please don’t approach the investors by yourself. Ordinary companies in manufacturing and service industries use the services of these companies to market their pitch and make sure investors are listening. They are specialists of their field and what i have read all these years, these people aren’t paid for without any reason. And lastly, investors usually are more comfortable (sorry about that) in the typical industries that they deal with on day to day basis and they some lack the ability to quantify what SEO really stands and means for the search engine optimization.

Best of luck Rand and i pray that you really successful in your attempts. Because I follow you on seomoz and whatever lessons you share with us (people of the seo world) make a lot of difference in our lives.

Thanks for reading .

Farrukh

Angela

When friends experience a big breakup before getting married I always tell them they are lucky because they got to see the “true colors” before it really mattered. Sounds like you were fortunate to see the true colors of these VC before you tied the knot.

We will look forward to the $1B announcement one day in the future.

Thanks for your detail and honesty because it is sure to help us navigate the VC waters.

http://milkmen.com Cody Baird

Rand,

As I read your post I experienced a number of emotions. Excitement to see your growth because I love & believe this industry will be the next home run for many of us. Anger to hear another ignorant comment about how SEO or inbound marketing is a fad that lacks legs or longevity. Then pleasure as I realize those type of comments are the proof that we are miles ahead of the other 90% of the market (SMB or fortune 500) that are still reliant on old school methods that produce weak results in terms ROI, customer engagement, and many other metrics.

I currently use at least a dozen tools (SEO, social media, analytics, content marketing etc.) on a daily basis to grow my own business as well as my clients. Pulling, reviewing, sorting the data to find KPI’s and create a plan to move forward takes time and years of experience. Then focus moves to trying to track progress and increase the efficiency of employees or 3rd parties work on various projects. Last I have compile all this data and the completed work to report/justify our fees to the clients. Your vision for growth (development of current tools and acquisitions) displayed in the slide share presentation is spot on!

Your Moz followers on the blog, users of the product, and employees are proof that you’re leading the right army to execute the vision with or without private equity help this year.

I love your transparency! It shows your confidence and foresight for the future of the industry and the company that you’ve bled to build. Well done & Thanks.

http://emreakkas.com Emre Akkas

Thanks for sharing this, Rand. The reality of new entrepreneurs and the world of investment seem to be very disconnected, still. Your experience and learning will help many of us make better decisions.

Too bad for Neil and his team, really. I seriously doubt they stepped back due to the weaker June/July numbers. If they did, you should count yourself lucky not being on the road with a partner who could dilute your focus with too much emphasis on the numbers in the near future. You got outstanding numbers to be proud of.

You guys are doing what you are doing very good, and that’s all it matters.

KD

Rand,
amazing post – I found it while researching on the VC funding process, something my organization is hopefully near the tail end of (a series A-ish).

Of the possible reasons you gave for why they pulled out, the one which probably appeals to me the most is market timing – it had to be something murky like that which Neil couldn’t spell out plainly.

Kudos to you and your team.

Paul

Rand,

Thank you for taking the time and sharing this experience. I think those at the beginning of their Entrepreneur road can definitely benefit and learn from your experience, and those who have been down the road of raising VC financing can definitely relate to the “ups and downs” of the process and the somewhat “merky” ways in which this world operates.

http://dozoco.com Bill Lynch

Rand –
I want to applaud your success! In my opinion your numbers to date are fantastic and I fully expect them to just get better!

I can’t tell you how impressed I am by the honesty, integrity and transparency of your post. There are all kinds of VC stories (good + bad) and there will always be success stories but I think the honesty, integrity and transparency that you and indeed SEOmoz continue to demonstrate is unique and the thing that we should take away from this post. Simply inspiring.

http://wpsites.net Brad Dalton

I really think its got to do with your attitude.

Some of you people at SEOMoz just seem to have this knack of pissing people off and it comes back to bite you

That’s the reason you missed out on VC but weren’t told the reason

No one likes rats and snakes so stop behaving like them

You’re even trying to control social media now!

David S

Hey Rand,
It would be awesome if Neil posted on the same transaction from his viewpoint. I wonder if firm politics blew up the deal. Just takes 1 powerful voice to queer the deal. The abrupt termination in the due diligence process was probbaly forced by someone else. In environments with strong egos and many partners fighting to deploy limited capital, deals with seemingly strong advocates get unceremoniously axed all the time (and pride would stop most people from telling you the true reasons). Anyway, I think you just maintain the course. There are likely other firms that could have stepped in though. Seems like you had pretty good rationale to pursue funds, wouldn’t let the experience dter you too much from your objectives.
Best of luck!

http://www.nuiteq.com Harry

Thanks for sharing. Sorry to see it went down this road for you. Something tells me you will achieve what you want to achieve, it just takes some more time.

Great post!

Harry

https://seo-nz.com Justin Boyce

Great Post Rand by the way I love Seo Moz

It is encouraging to hear a few years ago I came up with an idea about creating a hybrid type directory between a search engine and a social media platform which basically let users start threads about topics or websites which other users could add too or challenge the content by adding their own via modules such as video, images , articles, references etc etc and users voted on the best content in each module to form the basis of a search engine with the most popular content ranking in the top results.

I approached one local isp to see what they could offer in the way of servers and was astounded in the deal they offered me. While our own business is not yet dealing in revenues of millions of dollars and we are still quite some time away from launching it is great to see support from other companies. I was admitly worried about approaching others as I felt my idea might get pirated.

I am waiting to see what happens with Sopa however as this may kill the idea of entirely…

Anyway great post real inspirational.

http://www.mrhua.net mrhua

it really sucks, dude. but you don’t need those money! you guys rock, love seomoz

http://bybe.net bybe

Really Good Writeup, you provided tons of information and I’ve booked marked the page as I dont think my little brain will soak that much in all at once lol

Thanks for sharing.

http://www.antonioalcocer.com Antonio Alcocer

Hi Rand,

I just attended to your seminar at OMEXPO in Madrid yesterday and read this great post today. Thank you very much for sharing this stuff with all of us and congratulations for the values you promote in your organisation. Sooner or later, the $1billion company will be a reality rather than a dream.

I am not from the online marketing business but your conference what very inspiring and interesting.

Take care, wish you the best and thanks again for all,
Antonio Alcocer
Madrid

http://www.goEIO.com Chang

Amazing – thank you.

I think your post alone deserves some sort of national recognition – you’ve gone through the Vietnam War of startup fundraising and don’t you guys south of the border offer Congressional Medals or something for the kind of life-saving you have done? For surely you are saving a lot of startup “lives” with the insight you have provided here.

Ed Maklouf

As commented by so many, it is great to have a story that shows what happened step by step and includes those key moments when things “didnÂ´t feel right”.
Thank you for putting that out there.

Anu

Great post. Thanks so much for putting this together and sharing your experience.

Virgil

Awesome post!!!

sebastian

Great post, a tool that could really speed up funding by client discovery is My Viral
Web

http://www.incion.com/ web design orange ca

This was a stunning experience that you have shared here.. Thanks for sharing it..

nobody

Glad you’re thinking about how you’re doing. Wish you had an iota of thought about what you’re doing and why. Your success does not make the world a better place, sad to say. http://vimeo.com/68470326

Howdy! I'm Rand

Co-founder of Moz and Inbound.org, startup junkie, frequent traveler, blogger, social media addict and evangelist of all things TAGFEE. More about me here.